Online grocer BigBasket set to close Rs 800 Cr funding

BigBasket’s valuation was pegged at Rs 2,100 crore, or about $320 million, ahead of the transaction, show filings submitted to the ministry of corporate affairs on November 30.Aditi Shrivastava&Madhav Chanchani | ET Bureau | Updated: December 03, 2015, 17:44 IST

Online grocer BigBasket is in the final stages of closing a $120-million, or Rs 800-crore, round of funding, packing in ammunition to fight quick-delivery firms such as Grofers and PepperTap that are threatening to upstage its model.

BigBasket’s valuation was pegged at Rs 2,100 crore, or about $320 million, ahead of the transaction, show filings submitted to the ministry of corporate affairs on November 30. This makes the Bengaluru-based company the country’s second-most valuable ecommerce firm focused on a specific segment, behind online fashion retailer Jabong that was valued at about $483 million last year.

In the latest round of funding, Big-Basket is allotting fully and compulsorily convertible preference shares to Sands Capital at Rs 4,380 a piece, up from the Rs 1,666 share price when it issued stock to Helion and Zodius in August 2014.

BigBasket’s latest financing, which comes at a time when the domestic online grocery market is getting more competitive, was executed in multiple tranches over the past four months. Existing backers Helion Venture Partners, Ascent Capital, Zodius Capital and Bessemer ploughed in about $50 million and IFC is expected to invest $25 million. Sands Capital Management will invest about $35 million.

BigBasket expects gross merchandise value of $300 million, or Rs 2,000 crore, for the ongoing financial year ending in March 2016, chief executive Hari Menon said in a recent interview.

About one-third of its sales comes from its own brands such as Fresho and BB Royal. GMV is the total retail price of all the goods and products sold on its platform. Menon did not immediately reply to an email from ET. A spokesman for Sands Capital said the company had “no comment at this time.” BigBasket is being challenged by youngsters such as Grofers—which recently raised $120 million in funding led by SoftBank — and Pepper-Tap—in which online marketplace Snapdeal took a stake earlier this year—that deliver within few hours of an order being placed by partnering with neighborhood grocers. Flipkart, the country’s largest ecommerce firm, and Ola, the largeinst taxi-booking company, are also piloting their online grocery models.

BigBasket operates an inventory based model so they can ensure delivery of most of the products ordered. It is also partnering with about 1,800 neighbourhood stores to sell its brands of staples, fruits and vegetables. “We cater to both consumer needs, bulk pre-planned as well as on-demand emergency topups, with an inventory-led approach,” Menon said in the interview.

“For bulk orders, we fulfill orders through our warehouses and for one-hour express deliveries, we have set up about 63 ‘dark stores’ around the city.”

Dark stores are godowns or supermarket-like facilities meant specifically for companies like Grofers and BigBasket to source products from, saving them the hassle of having to go to neighbourhood stores to pick up supplies for delivery. BigBasket handles about 27,000 orders a day, at an average ticket size of Rs 1,500 per order. In January, Big-Basket will be present in 28 cities, up from nine cities now.

Industry observers say both the models are converging, with on-demand firms asking neighbourhood groceries to set up ‘dark stores’ and BigBasket catering to 1-hour deliveries. Grocery accounts for over 70% of India's total retail market of $350 million, according to a recent report by India Infoline.

Organised brick-and-mortar grocery retail has only a 3.4% market share, underlining the opportunity for online firms in this space. “Our interactions indicate that delivery costs (logistics and warehousing) for an online retailer are only marginally higher than real estate costs for an organised brick-and-mortar retailer,” IIFL said in its report. One of the key aspects working for BigBasket is the experience of its tight-knit team, as the founders — Menon, VS Sudhakar, Vipul Parekh, VS Ramesh and Abhinay Choudhari — had given grocery etailing a shot in 2001 with Fabmall.